Discussion
In the equation C = a + bY describing the aggregate consumption function, a stands for :
Answer: A
In C = a + bY, a is the amount of consumption when income is zero.
The intercept a is autonomous consumption: the spending people undertake even with no income, financed by past savings or borrowing. It is where the consumption function cuts the vertical axis.
The slope b is the marginal propensity to consume, the share of each extra rupee of income that is consumed. The marginal propensity to save is 1 - b. There is no 'maximum income' in the function; consumption rises steadily with income.
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